Market Insider/Wednesday Look Ahead

The afterglow from Intel's earnings news should be an early bright spot for stocks Wednesday, a day that will be ruled by earnings news.

Focus will turn quickly to other major reports, including J.P. Morgan , Wells Fargo and Coca-Cola , all expected before the bell. After the bell, IBM and eBay report.

Econorama

Inflation news is also important Wednesday. Consumer-level inflation data, CPI, will be released at 8:30 a.m. Housing starts and building permits are also reported at 8:30 a.m. Industrial production and capacity utilization are issued at 9:15 a.m., and the Fed's Beige Book on the economy is released at 2 p.m.

Tuesday's PPI release showed a surprise pick up in wholesale prices, even bigger if you include energy and food. CPI is expected to show an increase of 0.3 percent, but just 0.2 percent if you leave out food and energy. Certainly, the consumer is not ignoring the impact of food and energy.

Merrill Lynch's David Rosenberg issued a new report on the consumer who he says is "feeling small." As a result, retail sales have been stagnating, and retailers are closing stores. He points out that this type of "malaise" was last felt for a 10-month period in 2003, and before that in the 1991, 1982 and 1980 recessions.

He also says the consumer will not treat the tax rebate the way consumers spent the 2001 rebate. Very little will go to the real economy, and that means some of Wall Street's economic forecasts may be too optimistic. He says the stimulus may add just 0.5 percentage points to GDP growth from May to August. (Rosenberg was early to the recession view by the way.)

He says a difference between now and 2001 is that the average consumer now owes about $16,640 in non-mortgage debt, up 8 percent from a year ago. That 8 percent is also double the increase in wages. He says the average monthly payment for revolving and installment consumer credit of $815 is 9 percent higher than it was in 2007. Consumers in 2001 were worried about the internet bubble bursting, not the high cost of food, gasoline and health care.

Rosenberg says sentiment on housing is continuing to deteriorate, and consumer confidence is now being dented by worries about employment.

What's an investor to do? Rosenberg says what works in an environment where the consumer pulls back are high quality bonds, utilities, telecom, health care, food stores, discount stores and drug stores. What doesn't work are autos, home improvement, luxury goods, restaurants, recreation and hotels and casinos.

Earnings Central

Intel soothed investors when it reported an as expected, double-digit decline in first quarter net to $1.44 billion. Revenues rose to $9.67 billion, slightly better than expected. Intel affirmed its profit margin targets and said revenues would be $9 billion to $9.6 billion in the current quarter, above the $9.2 billion expected. Its stock jumped 7 percent after hours.

Earlier in the day, State Street and some regional banks turned in quarterly numbers that did not disappoint. (Note: State Street though spooked investors on its conference call and was downgraded to neutral from buy at Merrill Wednesday) But the same could not be said for Washington Mutual , which reported a $1.14 billion loss and said it was setting aside $3.51 billion for provisions. Meanwhile, the company faced a shareholder revolt at its annual meeting. Director Mary Pugh, who chaired the finance committee, resigned ahead of the meeting, and shareholders voted to split the jobs of chairman and CEO.

So far, forty-two S&P 500 companies have reported, or 8 percent. Earnings, so far, are down 28.3 percent from year ago levels and earnings have come in 3.4 percent below expectations. 71 percent, or 30 companies, have beaten estimates; 8 percent or four companies have been in line with expectations, and 19 percent or eight companies missed estimates.

It's early in the earnings season and there's a heavy impact from financials, which by some estimates could down more than 50 percent this quarter. I asked Brian Rauscher what he thinks now that we've seen a few numbers, including that big miss from General Electric . He left me the following message:

"My basic view is I don't think earnings are as bad as some people are talking about in the press ... My view hasn't really changed very much ... Now we had some better earnings news today," said Rauscher, director of portfolio strategy at Brown Brothers Harriman." The bottom line is there are certainly challenges here, and it's not just upside surprise after upside surprise. There's a challenging operating environment, but the bottom line from our perspective is earnings are not collapsing, and they are not going to be as bad as people anticipate in aggregate. Although one company here or there will disappoint."

Boiling Oil

As stocks meandered higher, crude set yet another record, finishing at $113.79 per barrel. Gasoline meanwhile rose 2.1 percent to $2.8810 per gallon and heating oil rose 2.2 per cent to $3.2736 per gallon.

M.F. Global senior vice president John Kilduff said oil broke out after it hit $110 and it could keep going for now. "The policy makers keep doing and saying things that are going to generate more dollar declines," said Kilduff, a CNBC contributor.

"We've had a whole raft of supply issues including Russian production being down. From some numbers we've been seeing, OPEC has been cutting 870,000 barrels a per day in terms of output," he said. Kilduff said Lloyds Marine Intelligence reported that OPEC output was down that much in March versus February. OPEC meanwhile said Tuesday it saw no need to increase production.

"The asset allocation right now still favors commodities and hard assets so that's what you're seeing. It seems to be a growing consensus that the dollar's going to break 160 on the euro," he said. The dollar finished Tuesday at $1.5788 per euro.

Marriages of Desperation

Antitrust officials are lining up to study the Northwest-Delta merger, and probably a United-Continental pact as well. The 19 percent rise in oil since Jan. 1 is something to consider when looking at those deals.

In that time, jet fuel in the Gulf Coast spot market has risen to $3.48 per gallon, from about $2.71 per gallon. In January, 2007, jet fuel was at $1.55 per gallon.